Hard Times In Tape Business

Between the shift to disk backup and the economy rolling downhill, times are tough for tape library vendors. While IBM and Sun can shift their sales from tape libraries the size of a small Winnebago to their home-built VTL, the makers of midrange tape libraries are having a tougher time as much of their sales came through OEM deals with EMC, HP, or HDS and those vendors' VTLs don't pay Quantum or Overland's rent. Even media vendor Imation is hurting.

Howard Marks, Network Computing Blogger

November 11, 2008

2 Min Read
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Between the shift to disk backup and the economy rolling downhill, times are tough for tape library vendors. While IBM and Sun can shift their sales from tape libraries the size of a small Winnebago to their home-built VTL, the makers of midrange tape libraries are having a tougher time as much of their sales came through OEM deals with EMC, HP, or HDS and those vendors' VTLs don't pay Quantum or Overland's rent. Even media vendor Imation is hurting.Quantum is being threatened with delisting by the New York Stock Exchange for trading at less than $1 a share for more than 30 consecutive trading days. While they can fix that problem with a simple reverse stock split, Quantum's fundamentals are nothing to write home about. The company that just 2 years ago bought ADIC for $770 million now has a market cap of just $57.6 million and an interest bill of $56 million a year that's in no small part still paying the ADIC bill.

On the plus side, Quantum has a respectable line of deduping appliances (but only sold $19M worth of them last quarter) and holds the Rocksoft patent on variable block size deduping. Software and patent license revenue from Dell, EMC, and Riverbed should start coming in soon, providing a new income stream.

Overland Storage is in even worse shape, losing $6.9 million last quarter with just $5.3 million in cash on hand. Their problems started when HP chose another vendor to supply midrrange tape libraries a while ago, cutting sharply into its income.

It also has VTLs, including a deduping model using the Diligent software, and recently picked up the Snap server line from Adaptec and is trying to make the transition to a disk-based economy, but management is desperately searching for $10 million to make it through 2009.

And even Imation is tightening its belt, laying off 200-plus employees (10% of the workforce) and closing a tape plant in Tucson, Ariz.

I'm thinking the ADIC guys timed this one just about right.

About the Author

Howard Marks

Network Computing Blogger

Howard Marks is founder and chief scientist at Deepstorage LLC, a storage consultancy and independent test lab based in Santa Fe, N.M. and concentrating on storage and data center networking. In more than 25 years of consulting, Marks has designed and implemented storage systems, networks, management systems and Internet strategies at organizations including American Express, J.P. Morgan, Borden Foods, U.S. Tobacco, BBDO Worldwide, Foxwoods Resort Casino and the State University of New York at Purchase. The testing at DeepStorage Labs is informed by that real world experience.

He has been a frequent contributor to Network Computing and InformationWeek since 1999 and a speaker at industry conferences including Comnet, PC Expo, Interop and Microsoft's TechEd since 1990. He is the author of Networking Windows and co-author of Windows NT Unleashed (Sams).

He is co-host, with Ray Lucchesi of the monthly Greybeards on Storage podcast where the voices of experience discuss the latest issues in the storage world with industry leaders.  You can find the podcast at: http://www.deepstorage.net/NEW/GBoS

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